Family businesses are publicly believed to be highly innovative and to be the Hidden Champions of the German industry. In recent times scholars have begun to examine this thesis and have come to starkly opposing results. On the one hand family businesses are attested to have a special entrepreneurial spirit which makes them highly innovative. On the other hand the lack of separation of ownership and control and insufficient diversification of family-investors are said to lead to less innovation activity. In this study we investigate the innovation activity of 436 German manufacturing firms differing in legal structure, size, age, industry, and - most importantly - in the degree of family ownership, family management and family control. The results of our analysis reveals differentiated results. Fundamentally, family ownership and family management are detrimental to firm innovation, at the same time family control has a positive impact on innovation activities. Our Results point to the fact that owner-managed businesses tend to innovate less due to risk aversion while a focus on controlling instead of managing a corporation by the owning family lead to an increase in innovations.